The size of a property is one of the most significant valuation factors for all property types, so appraisers must measure and report the size of buildings in a consistent manner. Gross Living Area (GLA for short) is calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space. Upper levels are measured from the inside from the most exterior wall (this is why we look in closets, etc., to see angles and locate the most outer wall).
Habitable space below grade (i.e. the basement) is treated separately and is not included in the GLA. Market preference determines value for below-grade areas. This concept causes confusion among real estate agents, owners, and buyers because they often want to consider finished basements as part of the above-grade area.
When it comes to making an apples-to-apples comparison of a comparable property to the subject property, there are more homes without a basement than there are homes with a basement, so the areas are separated and valued accordingly.
1250 square feet above grade level with 2 bedrooms and 1 full bath
1250 square feet below grade level with 1 bedroom and 1 full bath
That also plays a part in if a room you are classifying as a bedroom can be considered a bedroom.
Codes calculates the size of a septic tank not by how many bathrooms you have but on how many people are potentially living in the house, i.e., number of bedrooms.
So, if the house has a septic system and was permitted and built with 3 bedrooms and you add a room without getting a permit, the house still has three bedrooms.
Adding another sleeping quarters means you either must increase the current septic tank capacity or add an additional septic tank which can cost over $10k.